The past two weeks, we looked at the Housing Recovery theme, in 5 parts. We sought to challenge the arguments and assumptions of many of the Residential Real Estate bulls.

Here are the distinct parts:

1. Shadow Inventory.

2. Can Buyers Afford Homes.

3. Problem With Home Prices.

4. Foreclosures: A Decade Long Overhang.

5. Fear of Buying: The Psychology of Renting.

 

Its a broad topic, and this series lays out my views

Category: Real Estate

Please use the comments to demonstrate your own ignorance, unfamiliarity with empirical data and lack of respect for scientific knowledge. Be sure to create straw men and argue against things I have neither said nor implied. If you could repeat previously discredited memes or steer the conversation into irrelevant, off topic discussions, it would be appreciated. Lastly, kindly forgo all civility in your discourse . . . you are, after all, anonymous.

10 Responses to “Closer Look at the Housing Recovery Meme (in 5 Parts)”

  1. haileris says:

    I think you are severely underestimating the housing market in areas where the economy is strong (primarily major cities on the coasts).

    The prime determinant is whether the buyers in the area have cash due to 20% down requirements. In areas where the economy is relatively stong, there is no housing inventory due to excessively low interest rates.

    The Silicon Valley market is beginning to feel like a bubble, as if it was early 2005. Recently, a house sold in Palo Alto with 38 bids, and $400k above asking price. Current inventory in San Francisco is around 1 month, I don’t think it was this low even at the peak of the bubble.

    Subprime heavy markets like Modesto, CA have shadow inventory, but it’s nonexistent in Silicon Valley, I hear it’s similar in New York and DC suburbs.

  2. DeDude says:

    I can see that these are good reasons to suggest that getting things to go “higher” in the housing markets will face a lot of resistance. But none of this is new, so I don’t think it would suggest that things would fall substantially lower than current levels. Unless we go back into recession, I expect a slow but steady improvement in all the price and sales numbers. Calculated risk had some stats from Lawler yesterday suggesting that most markets have substantial increases in non-distressed sales numbers. That to me suggests that we are moving in upward direction in spite of those 5 points you mention above.

    http://www.calculatedriskblog.com/2012/04/lawler-early-read-on-existing-home.html

  3. Lookout Ranch says:

    I have actually participated in the housing market in the Sierra Foothills of California and in Baltimore due to the fact that my grown kids live in these areas, and I have helped them look at housing over an extended period.

    In both markets the rent/own cost ratio makes home ownership attractive. In both markets nice, affordably priced homes in good areas are selling. The best deals are snapped up quickly.

    Baltimore didn’t have a housing Bubble so much as it has a chronic depopulation problem.

    The Sierra Foothils is seeing a divergence. Outlying rural areas with long commutes are depopulating and the housing markets are weak. Areas close-in with good commutes are fairly healthy with little good inventory of houses in affordable price ranges.

    There is a lot of substandard crap on the market that may never sell, or that will have to be severely discounted.

  4. Lookout Ranch says:

    My experience in markets on both coasts where my kids live suggests good quality affordable houses in attractive areas sell quicky. You have to move quickly and have financing lined up to get the choicest deals.

    The biggest problems are concentrated in a few markets.

    Also, there are two other things playing out:

    1. People are moving closer to city cores. Outlying real estate is not improving, but markets closer in are.

    2. There is a lot of substandard and/or unfinished crap on the market that will likely never get purchased with conventional financing. These will become projects for enterprising people who will buy them at steep discounts or they will be abandoned. New houses will be built before a lot of these are sold.

  5. cognos says:

    BR -

    You seem to confuse “recovery” with “boom”.

    The latter follows 5-10yrs after the former.

    Real estate seems a unbelievable investment, esp if one has the time to do the dirty work to buy distressed and rent (inc maintenance). Basic #s are 7-12% rental cap rates versus 1-4% financing.

    Thats the definition of “free money”.

  6. Tim says:

    And the catass trophy goes to…..the worst markets, FL, NV,etc., people with underwater mortgages, the inventory hangover, and the inevitably slow recovery from the great recession.

    Rural homes, and farmland within easy commute from a city (<2 hours/100 miles) are the greatest investment opportunities right now – prices are down, weekend country getaways will always be in demand, and farmland has nowhere to go but up.

  7. blackjaquekerouac says:

    here are my five:
    “when bubbles burst all the money in the world can’t solve the pricing problem.”
    “when bubbles burst all the money in the world can’t solve the pricing problem.”
    “when bubbles burst all the money in the world can’t solve the pricing problem.”
    “when bubbles burst all the money in the world can’t solve the pricing problem.”
    and…(drum roll please!)
    “when bubbles burst all the money in the world can’t solve the pricing problem.”

  8. Realtors Are Liars says:

    Tim Says:

    Rural homes, and farmland within easy commute from a city (<2 hours/100 miles) are the greatest investment opportunities right now – prices are down, weekend country getaways will always be in demand, and farmland has nowhere to go but up.

    ———————————————————————————————

    You're going to be stunned how low land prices fall. Land is a dead asset and is grossly inflated at current levels.

    The truth is land has nowhere to go but down……..

  9. [...] Closer Look at the Housing Recovery Meme in 5 Parts (April 17th, 2012) PERMALINK Category: Real Estate, Really, really bad [...]

  10. [...] A Closer Look at the Housing Recovery [...]